How Much Money Do I Need To Start Investing In The Stock Market?
No doubt investing in the stock market requires money. However, how much money do you need to start investing and what are the best investments? In this guide, we will tell you everything you need to know to invest successfully and how to use the money you already have to have the best investments.
How much money do I need to start investing?
Whether you’ve been disciplined and saved money, received an inheritance, won the lottery, or want to start making an investment plan, it’s important to know how much money you need to invest and how to invest those funds so that your money works for you.
Although there is no single answer, in this guide we will give you several principles so that you can make the best decision when starting to invest according to the amount of money you have available. To make it easier, we have created this guide in dollars, but the same principles apply to the equivalent amount in your local currency.
Money to start investing: $0 to $1,000
If you want to start investing and you only have $0 to $1,000, your priority should be to have an emergency fund, since $1,000 or less is considered too little to be able to invest in the stock market.
Everyone has unexpected expenses, and an emergency does not ask for permission to introduce yourself into your life. You should be well prepared for a pay cut, unexpected medical bills, or personal crises.
How much should you have in your emergency fund? The value will vary based on your situation, but for most people, this savings fund should have at least 3-6 months’ worth of expenses in an account you have easy access to. It is recommended to have it in cash, in a savings account at the bank, or in a certificate of deposit that does not have a penalty.
Although we know that these vehicles will not give you the best returns on your money, you should see them as a small incentive to save your emergency money. In addition, in unexpected situations, you will be better protected and prepared.
How much money do I need to invest? How to invest $1,000 to $5,000
If you have $5,000 to $25,000, you should consider your medium-term goals: After you have an emergency fund, you can start investing in the stock market through a stockbroker or discount broker.
If you’re saving for a short-term goal like a car this year or next year or a down payment on a house in a few years, your investment should be in low-risk companies (which are likely to give you dividends and returns). modest), since in this way your money could be more stable.
Examples of stable stocks: Companies like Coca-Cola, PepsiCo, Apple, Microsoft, Nestlé, Procter & Gamble, Colgate-Palmolive, supermarkets, food or essentials companies, etc.
You can start investing with just $1,000 and watch your investments grow
NOTE: We are not saying that you should invest in these companies! They are just examples of companies that have presented a stable price and return over time.
However, you must keep in mind that nothing is certain in the stock market and that you should not invest an amount that you are not willing to lose. Historically, the stock market has presented good returns on investments, but this does not mean that your investment is insured.
How to invest $5,000 to $10,000
If you’re ready to start investing $5,000 to $10,000, you can start planning your investment portfolio. You will need time to assess how much risk you are willing to take and the companies you will invest in.
It’s also a good idea to invest in your financial education with the investing books on our list. These are two strategies you can take:
- Portfolio of companies 50% stable and 50% risk – divide your investment capital into two equal parts: one to buy shares of stable companies and the other to buy riskier companies. You should also adjust these percentages for your age. The closer you are to retirement, the less risk you should take.
- Portfolio of 70% stocks and 30% other investments – stocks aren’t the only ways to start investing. You can diversify your risk and improve your returns at critical times by dividing your investment portfolio into 70% stocks (35% stable stocks and 35% risky stocks) and 30% in other investment vehicles such as bonds or certificates of deposits.
Create an investment portfolio and divide your money when you start investing for less risk and more diversification between high-risk and low-risk stocks
How to invest $10,000 to $25,000
If you want to start investing $10,000 to $25,000, you can diversify your investment portfolio so that you can receive dividends and earnings from the growth of other companies. You can follow the strategies above, dividing your portfolio into percentages that suit your goals and needs.
How to invest $25,000 to $50,000
By having $25,000 to $50,000 to invest, you open the door to other, more effective investment vehicles. With more investment money, it becomes more difficult to follow the activities and prospects of various companies. That’s why we present an alternative:
- Invest in mutual funds – mutual funds (although there are several types, the most common are known as ETFs or Exchange Trade Funds ) allow you to provide your money to a fund managed by a professional who is responsible for managing and diversifying the fund to earn money. These funds are our favorites as they are low-cost and have consistent earnings. Some of the investment funds with which you can start investing are:
- Diversified investment fund of the US stock market such as the Vanguard Total Stock Market ETF or iShares Core S&P Total US Stock Market ETF (50% of your investment capital)
- International stock market investment funds such as the Vanguard International Stock Market ETF or iShares Core MSCI Total International Stock ETF (20% of your investment capital)
- An investment fund in international government bonds such as the Vanguard Total International Bond ETF or iShares International Treasure Bond ETF (15% of your investment capital)
- Investment fund in US bonds such as the Vanguard Long Term Government Bond ETF or iShares Core US Treasury Bond ETF (15% of your investment capital)
These investment funds are excellent for investing in the stock market since through them you can own hundreds of shares at the same time and thus minimize your risk and keep your portfolio diversified.
When investing from $25,000 to $50,000, your best option will be to put your money to work in the investment funds mentioned.
How to invest $50,000 to $100,000
When you want to start investing $50,000 to $100,000, you should start diversifying your investments to get the best returns. This means that your investment portfolio should include stocks, bonds, and mutual funds from different sectors to get the best results.
The more money you have to invest, the more important it is to manage the risk you may have, so you need to plan for the long term so that you can turn this money into much more with different investment methods.
Another investment method that you can consider (apart from stocks) is to buy real estate or real estate so that you can reduce the risk of your investments.
To invest from $50,000 to $100,000, take advantage of diversified investment funds
How to invest $100,000 or more
When starting to invest $100,000 or more, it is recommended to have a diversified portfolio that should encompass all of the investment methods mentioned above (stocks, bonds, mutual funds, real estate).
Remember that based on average stock market returns over the years, a well-diversified $100,000 investment portfolio can earn $4,000 to $20,000 a year.
At this level of investing, financial education is increasingly important, so invest in yourself and educate yourself about the different investment vehicles and how the stock market works so that you can earn the most money on your investments.
When you have an investment portfolio of $100,000 or more, you should think about diversifying your investments with real estate.
As your investment portfolio grows and your age increases, it is advisable to move your assets to less risky investments such as government bonds and certificates of deposit.
As you consider your best options when starting to invest, put the money in a certificate of deposit at the bank. This will make you avoid hasty decisions.
The best advice to start investing
It doesn’t matter if you have $500 or $50,000 to start investing, the most important thing is to start multiplying your money as soon as possible with the investment methods mentioned in this guide.
Historically, stocks have provided returns unmatched by other investments, so the earlier you start investing money, the faster you’ll earn dividends and see the value of your stock grow.
Finally, we want to say that one of the most common mistakes with people who want to start investing is wanting to put money in stocks before studying the financial landscape of the industry. No one knows for sure what the future holds, and you may unexpectedly need to use money much sooner than you think.
That is why it is important to plan your investments with an emergency fund before you start investing, which will give you the flexibility you need when making investment decisions and will also be more prepared to face any unforeseen economic difficulties.
How much money do I need to start investing? Questions and answers
You have more questions about how much money is needed to start investing in the stock market. If you have money. If you want more ideas on how to invest your money or the best way to invest $1,000, $5,000, $10,000, or more, leave us a comment below and we’ll help you find a good investment vehicle that suits your personality.
Similarly, if you have already started investing in stocks or the stock market, leave us a comment telling us how you did it and how the results have been so that others can benefit from your wisdom.
